Right or not right (to buy).

In the run up to the general election “leaving politics aside” is always difficult… especially when it concerns one of the cornerstones of everyday life – home…

The UK’s obsession to become homeowners has deep roots – potentially all the way back to the Battle of Hastings which led to the introduction by William the Conqueror of the Feudal system and Common Law. Of course the English Civil War and the Tenures Abolition Act ended the feudal system in 1660 but even so the idea that an “…man’s home is his castle” has not changed in almost 1,000 years.

Clearly as an island nation, with a strong naval history, the past 1,000 years have seen less wholesale or partial changes of sovereignty than elsewhere in Europe and one may argue that this is the reason that land has been able to establish value and the ownership culture has been able to blossom.

For the millions of people fortunate enough to already own a home sufficient for their needs the subject of housing is an evocative topic that usually only pops up in the psyche every now and then (usually triggered by changes in family circumstances, employment,mortgage rates etc.).

When triggered the standpoint of this group is usually introspective and set in the present or the future. However, if you add the words “affordable” or “social” into the housing topic and move the debate to encompass others the standpoint can shift dramatically to become judgmental, oppressive and backwards looking.

For the UK’s thousands of homeless men, women and children and millions more waiting for suitable housing the subject of housing is a daily topic – and more worryingly a daily source of disappointment.

As we know the human race is a resilient and resourceful species and many of those in housing need find ways to get on with their lives the best they can… but at a price. Inadequate housing is one of the top contributing factors for poor physical and mental health.

So… to the question… right or not right (to buy)?

This question will no doubt be exercising the minds of many in the housing world… of course the politicians hope that it will be exercising the minds of voters too!

Over the past 50 years, regardless of political agenda, successive UK governments have courted and encouraged home ownership with tax incentives, direct and indirect stimuli. But why?

The concept of a society with a long term property interest could be said to drive collective self-control of the population via the personification of property assets and a human desire to protect the self.

In short… people don’t riot in their own home.

However, if you consider the homes role as an asset it will do far more that provide physical protection… where demand outstrips supply it will provide economic protections.

First let’s address whether encouraging home ownership is good…

In addition to the social control point here’s another good reason why ownership is being encouraged (by all parties). The UK’s ageing population is a time-bomb for the NHS. The only ways to diffuse this are: 1) Abolish the “free to all” NHS. 2) Increase taxation consistently over decades on a potentially shrinking working population (unfortunately this will mean taxing the majority of the UK who pay the majority of tax not simply increasing taxes on the rich who are potentially tax-mobile). 3) Require the ageing population with property wealth to fund their own late stage life needs. (I did say I’d try to suspend politics but clearly 1 and 2 are political non-starters!)

So… 3 it is… get more of the population on the housing ladder, encourage ownership culture and allow the controls to supply to remain in place to fan the flames of house price inflation and the NHS black hole looks manageable. The trick is fanning the flames gently over a prolonged period.

Second, let’s address the issue of future Government investment to stimulate more housing delivery… (Sorry more politics for a moment…)

It doesn’t matter what the outcome is after the 7th of May… the fact is that the whole planet is de-leveraging and the UK is no different. Despite the economic benefits of house building (which really is a key economic driver of recent UK GDP improvements) it is highly unlikely that any future Government will buck this international trend and borrow significantly – especially to fund housing instead of the NHS or education. So, as much as it may make sense to do so, there’s not likely to be any significant new money for housing.

With housing subsidy in short supply, what little money any Government may have for housing will need to be spent wisely. Love it or loathe it the Help To Buy programme has shown that delivery direct into customers hands via house builders is both effective (delivering more homes that the HA sector in the same period) and efficient (subsidy is not subject to leakage from sector on-costs on the way through).

So to summarise… future governments (with not much money for housing) will need to spend it wisely and maximise delivery to meet rising demand.

As many people struggling to make ends meet will attest… If you don’t have enough money and you can’t earn more or borrow more then you need to sell something (if you have anything to sell).

You will be pleased to read that this brings us closer to a conclusion…

Historic Governments have invested billions in the current housing stock – nearly £50bn of housing grants. Additionally, the majority of this stock was created or transferred at historic cost or a significant discount meaning that there is the same again if not even more embedded value. The challenge is accessing it…

Clearly, with lifetime and assured tenancies eviction and sale is a no no. But Government figures suggest that there are over 500,000 people who could afford to own their social rented property… the question is how many of these people would like to?

Currently just around half of all social rented housing has the Right To Buy. Purchases by tenants releases this value for future delivery. In theory this is exactly what needs to happen if tenancies are to continue to be assured and people allowed to stay in their publicly funded homes for life (whether this policy should continue is a “hot potato” I will save for another day…).

However, the current Right To Buy is not delivering… why?

Simply put it’s because the level of discount provided is too big and the Government is pursuing a strategy of outright sale.

Is it “Right” to be able to buy… put it this way… the Government supported people into housing when they needed it most… if they have taken this support and transformed their life to a stage where they can support themselves and own their home then this is a success and the level of support should rightly be recycled to the millions of people waiting who need it (either that or the property should be re-cycled… hence the “hot potato”).

The idea of “handing back the crutch” you no longer need so others can use it has got to be right.

But, the current policy to make “handing back the crutch” affordable across the UK on an outright sale basis means discounts so big that people who accessed housing on their own are potentially disgruntled.

The answer is a shared ownership offer.

The purchase is affordable, the home remains in the sector, the customer is an owner, they can buy more in the future, the discount required is significantly less.